This article is based on LiveStream at Move To Prague’s YouTube channel that took place on 31.1.2024 at 17:30.
The livestream was hosted by Jan and Daria, Co-Founders and Co-Owners of Move To Prague and your questions were answered by one of the most experienced expat mortgage advisers in Czech Republic.
The article below is a brief summary of the expert’s answers. If you are interested in the full answers + a few more that you asked live, please watch the full recording here: https://youtube.com/live/iGJAFvus2k4?feature=share.
If you are interested in getting a mortgage in Czech Republic as a foreigner or just have any further questions, fill in any of the forms on this page and we’ll be happy to answer these 🙂
Let’s dive in now though!
Most Commonly Asked Questions about Mortgage in the Czech Republic
Basic Mortgage Terms
Q: What does “fixation” or “maturity” mean in Czech mortgage?
A: Maturity is basically the number of years you got the mortgage for (i.e. 30, 40 etc.). Fixation is the period your Czech mortgage will have a fixed interest rate. This can be from 1 year to the end of the mortgage but the most common is between 3 and 10 years.
Qualification Requirements for Czech Mortgage
Q: What type of residence permit do I need to get a mortgage in Czech Republic?
A: You can get a mortgage in the Czech Republic already with a long-term residence permit (plastic card) such as an employee card or a business residence permit if your income is high enough and you can prove it. If you have a permanent residence permit in the Czech Republic, you are treated exactly the same way as a Czech citizen from the mortgage perspective.
Q: How much in advance (and what) should I start preparing to get Czech mortgage?
A: Will be answered during the livestream.
Q: How much of a downpayment do I need to get mortgage in Czech Republic?
A: This primarily depends on your age. If you are below 36 years of age, the minimum downpayment is 10%, if you are above 36, the minimum downpayment is 20% from the price of the property.
Q: Can only employees get mortgage or freelancers as well?
A: Both employees and freelancers can get a mortgage in the Czech Republic. The difference is mainly in proving your income which might generally be a bit harder for freelancers since the income you can prove depends on the way you did your taxes (i.e. big difference between flat tax, 60/40 deduction and paying taxes from the full income).
Q: Do I need to have income from the Czech Republic to get Czech mortgage?
A: Not necessarily, your income should be ideally taxed in the Czech Republic though.
Q: What can I do in long-term to increase my chances of getting mortgage in Czech Republic?
A: Czech Republic does not use anything like a “credit score” known from the US and other countries so just a few tips here.
- If you already have a loan or mortgage, make sure you are not late with your payments – although there is no “positive registry” where you would build your score in the Czech Republic, there is a negative registry where people get listed if they do not pay their monthly payments properly (this can include also your phone bills).
- Save enough money for the downpayment – the minimum you will need to pay as a downpayment is 10 or 20% from the price of the property. So, if you want to buy a flat for 5 000 000 CZK, you will need to have at least 0,5 or 1 million CZK ready.
- Consult with a professional – this might seem cheeky but if you want to increase your chances of getting a mortgage, it is best to speak with someone who has been through the mortgage process many time, have seen all the different variations and has contacts in all banks. It helps you leverage their knowledge and experience for your advantage.
Technical Mortgage Questions
Q: How much money can I borrow using Czech mortgage?
A: This primarily depends on your income and on the downpayment you make. One example given by our expert was a family of two with combined income of 70 000 CZK month who could get a 5 000 000 CZK mortgage easily. Generally speaking your monthly mortgage payment can not be higher than 50% of your income.
Q: How long does the processing phase of getting mortgage take?
A: How long it takes to get a mortgage in the Czech Republic is highly individual because it depends on the property you have chosen, on your income and how well you are able to prove it, on the bank etc. Generally speaking somewhere between 2 weeks and 4 months with average being around 2 months.
Q: Can I pay off Czech mortgage sooner than contracted?
A: Yes, but. As of now (Jan 2024), you can pay off the mortgage anytime with now fees. Since 9/2024, there should be a new law becoming effective saying that you can pay off your Czech mortgage without any fees only if that is at the end of your fixation period. If you want to pay off the mortgage within the fixation, the bank can charge you up to 2% fee.
Q: Can I re-finance my mortgage during the fixation period?
A: The answer to this is basically the same as for the previous question. Re-financing basically means paying off your mortgage and getting a new mortgage with different (hopefully better 🙂 ) conditions. So the same rules and for paying off apply.
Q: Can I sell the property before the mortgage is paid off?
A: Generally speaking yes. You have to pay off the mortgage though or transfer it to the new owner (possible but not that common).
General Questions about Mortgage in Czech Republic
Q: Is it better to wait for the interest rates to go lower?
A: According to out expert, it does not make much sense. What makes sense though, is to think well about your fixation period. The thing is that two parts go against each other here: mortgage (interest) rates and prices of the properties. When mortgage rates are high, less people buy and properties get cheaper. When mortgage rates are low, more people buy and property prices increase.
So, it is actually a good time to buy when mortgage rates are high (because you can get cheaper properties), you should just make sure you go for a shorter fixation period so when the rates go lower, you can benefit from that.
Q: What is the difference between private and co-operative ownership (“družstvo”)? How does it influence the mortgage process?
A: The general difference is that when in housing cooperative, you do not actually own any apartment, you basically own a share of the whole building. That can create many troubles starting from needing consents of all the other “share-holders” to do anything with “your” apartment – reconstruct or even rent it out.
In terms of getting a mortgage, banks can not use your “share” as a collateral to your mortgage so unless you own another property they could use as collateral, getting a mortgage for a flat in housing cooperative is basically not possible.
Quite a lot of questions about Czech mortgage, right? Do you have any question that is not listed above? Get in touch with us using any of the contact forms on this page and we’ll be happy to connect you to our expert.
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